[SAA FOR NAFTA CHAPTER 10]
NORTH AMERICAN FREE TRADE AGREEMENT, STATEMENT OF
ADMINISTRATIVE
ACTION,
CHAPTER
TEN:
GOVERNMENT
PROCUREMENT, H.R. DOC. NO. 159, 103D CONG., 1ST SESS. 134-137
(NOVEMBER 4, 1993)
[Through] Chapter Ten the three NAFTA countries [agree] to eliminate “buy
national” restrictions on the majority of non-defense related purchases by their federal
governments of goods and services provided by firms in North America. For the United
States and Canada, this represents a further elimination of barriers to participation in each
other's government procurement markets, building on the [Tokyo Round] GATT
Agreement on Government Procurement (“GATT Code”) and the [Canada–U.S. Free
Trade Agreement, CFTA].
Under the NAFTA, Mexico – which is not a party to the GATT Code – has
committed for the first time to eliminate discriminatory government procurement
practices. Mexico has made this undertaking solely in respect of U.S. and Canadian
firms, goods and services. European, Asian and other competitors do not benefit from
Mexico's procurement commitment under the NAFTA.
1.
Scope and Coverage
Chapter Ten covers virtually all federal government agencies in the three
countries, as well as a significant number of federal government enterprises, often
referred to as “parastatals” in this context. The agreement applies not only to
procurement of goods, but also, for the first time in an international trade agreement, to
procurement of services, including construction services. The entities, goods and
services covered by the chapter are specified in Annex 1001. Article 1022 provides that
changes in the coverage specified by each Party are permitted only under exceptional
circumstances.
a.
Covered Entities
Chapter Ten will for the first time give U.S. products and services guaranteed
access to procurement by Mexican Government agencies. Chapter Ten also goes beyond
the CFTA by extending coverage for goods to additional U.S. and Canadian federal
agencies, and to services and construction services purchased at the federal level. Unlike
the CFTA, NAFTA will also cover purchases by government-controlled enterprises,
including those by Mexican parastatals, whose purchases account for a large percentage
of total Mexican government procurement.
As set forth in Annex 1001.2a, the Mexican Government will provide U.S. and
Canadian suppliers growing access to purchase contracts by PEMEX, the state-owned
petroleum company, and CFE, the Mexican Government’s electrical utility. When the
NAFTA enters into force, Mexico will immediately open 50 percent of PEMEX and CFE
procurement to U.S. and Canadian goods and services, with progressive annual increases
through 2002. Thereafter, Mexico’s government procurement market in the energy
sector will be completely open, subject to limited PEMEX and CFE procurement “setasides” for Mexican suppliers.
b.
Thresholds
Chapter Ten applies to purchases by specified federal government agencies and
federal government-controlled enterprises in each NAFTA country above certain U.S.
dollar thresholds. [These dollar thresholds are summarized in Table I later in this
Chapter, and are revised periodically.]
…
c.
Exclusions
The rules of Chapter Ten do not apply to certain kinds of purchases by the U.S.
Government, among them:
●
●
●
●
●
purchases under small or minority business set-aside programs;
procurements for national security purposes and certain items purchased by the
Department of Defense, including those subject to “Berry Amendment”-type
restrictions;
purchases by the Department of Agricultural for farm support programs and
human feeding programs;
purchases by the Agency for International Development for the purpose of
providing foreign assistance (purchases not for the direct benefit or use of AID);
and
procurements by state and local governments, including procurements funded by
federal grants, such as those made pursuant to the Federal Transit Act (49 U.S.C.
App. 1601 et seq.) and the Federal Aid Highway Act (23 U.S.C. 101 et seq.).
The Schedule of the United States contained in the General Notes, Annex 1001.2b
specifically excludes from Chapter Ten’s coverage set-asides on behalf of small and
minority businesses. This exclusion exempts from Chapter Ten’s rules U.S. Government
procurement programs such as those which give preference to small businesses, business
concerns and private and voluntary organizations owned or controlled by women or
socially and economically disadvantaged individuals, historically black colleges and
universities, and colleges and universities with substantial Hispanic or Native American
enrollment. The exclusion is identical to that taken by the U.S. Government under the
GATT Code. It means that the President does not have the authority to waive existing or
future laws, regulations, procedures or practices under these programs to allow
procurements by Mexican or Canadian businesses.
2.
General Disciplines
2
The general rule of Chapter Ten, set out in Article 1003, is that the three
governments must treat goods and services from another NAFTA country – and suppliers
of such goods and services – “no less favorably” than domestic goods, services and
suppliers with respect to purchases by covered government entities. In addition, under
Article 1006, each government is required to ensure that its entities do not consider, seek
or impose “offsets” in the evaluation of bids or the award of contracts. “Offsets” are
contract conditions that encourage local development or improve the country’s balanceof-payments accounts by requiring, for example, local content, the licensing of
technology, local investment or countertrade. Article 1007 provides that the purpose and
effect of technical specifications should not be to impose unnecessary obstacles to trade.
3.
Procurement Procedures
Articles 1008 to 1016 set out a series of rules designed to ensure that procurement
practices in all three countries are fair, transparent and predictable.
The basic rule, established by Article 1008, is that of non-discrimination in
procurement procedures. The NAFTA also requires covered entities to follow procedures
similar to those required under the GATT Code, with respect to qualification of suppliers,
time limits, documentation, award of contracts and other aspects of the procurement
process. The United States and Canada already adhere to these procedures. Mexico will
be adopting them for the first time under the NAFTA. They will result in significant
changes in the way Mexico conducts its procurements.
Article 1014, for example, requires a minimum degree of fairness and competition
in the process used to negotiate a procurement, while Article 1015 requires contract
awards to be made in accordance with criteria set out in advance. Article 1016
recognizes that each government will sometimes need to deviate from the rule of open
competition. But the article requires that “limited tendering” be as competitive as
possible and be used only in limited circumstances.
In order to promote fair and open procurement procedures, Article 1017 requires
each government to maintain a “bid challenge” mechanism enabling individual suppliers
to have the entire bidding process reviewed. Suppliers from other NAFTA countries will
have the right to challenge both bid procedures and contract awards, and will be assured
that an independent body in each country will review such challenges and recommend
action to correct any discrepancies.
3